Vacant building 'eyesore' no more

Developer hopes rehab will attract business tenants

LOWELL -- The flaky orange paint that once covered the exterior of the boxy Freudenberg Nonwovens building has been replaced by a sharp, three-shades-of-tan scheme reflecting the structure's concrete core.

Historic windows that once graced the five-story building -- and were filled in with concrete -- have been restored to their original design and space.

And the debris-filled structure has been gutted and cleaned to show off its strong, concrete columns on its middle floors that were once home to industry.

As Larry Sparrow, Trinity Financial's senior construction-project manager, puts it, "What was once the biggest eyesore in the area has been transformed into a pretty sharp-looking building."

But the question of who will fill the revamped 55,000 square feet of office space in the rehabbed commercial property at 110 Canal St. remains.

That's because Trinity Financial, a Boston firm hired by the city to oversee the $800 million development of the Hamilton Canal District, decided to rehab the Freudenberg building "on-spec," or without tenants lined up.

It's a bold move, according to commercial real-estate experts contacted by The Sun, because of the risk that tenants won't fill the space after millions of dollars are sunk into rehab work.

However, those experts say on-spec projects also have the potential to attract tenants who could not envision the space before renovations as a future home for their business. So such projects can be a risk well worth taking, they said.

Rebecca Herbst, a research analyst with Jones Lang LaSalle of Boston, said property owners and developers walk a fine line when deciding whether to do on-spec work.

A commercial building that is clean and is near ready for occupancy is more enticing to potential tenants than one that needs a major makeover, Herbst said.

But in a slowly improving economy, most property owners are reluctant to invest millions of dollars upfront to rehab commercial space without assurance of return on their investment, she said.

"In today's environment, it is quite difficult for landlords to invest in rehabbing facilities without knowing tenant commitment," Herbst said. "Trinity Financial is more of an exception rather than a trend."

Eric Anderson, vice president of leasing and operations for Cummings Properties of Woburn, agreed that rehabbing commercial properties on-spec is not the norm, especially because of the potential for failure.

"There's always risk because you can spend all sorts of money on improving buildings, but if the economy does not turn around and no tenants come on board, you can have all sorts of bills to pay and no source of revenue," Anderson said.

However, Anderson said his commercial real-estate development firm has had many success stories with on-spec projects over the last five-plus years. He cited the Trade Center project in Woburn as an example. He said 95 percent of the commercial space located around the Middlesex Superior Court building is leased.

Anderson said one of the keys to the company's record is that it does not hold any debt on the properties it takes over, which is a financial luxury other commercial developers don't have.

"We can take more risk than others, and we have had great results doing so," Anderson said.

She said the $8.5 million "core-and-shell" rehab is the first on-spec project for a 100 percent commercial space that she can recall Trinity undertaking. But she said it was a necessary move because lining up tenants for the site while it remained a dilapidated building would prove difficult, she said.

"People could not get beyond the look of the building as it was," Goldenfarb said. "As people are seeing the building take shape, it is becoming more real to them."

Trinity is working with CB Richard Ellis of Boston to secure tenants to lease the building. Goldenfarb said there have been conversations with a number of young, innovative technology firms, but no definite commitments as of yet.

The ideal end result would be one company filling the whole space, Goldenfarb said, but the building can accommodate two tenants per floor. The building will be ready for tenant fit-up beginning in February, and the rehab work should be complete by April.

Goldenfarb said she remains confident that Trinity will be able to fill the building.

"We really believe strongly in the Lowell market, as evidenced by our ability to complete the Appleton Mills project during such a difficult economic time," said Goldenfarb, referring to the 130-unit, affordable-housing complex in the district.

City officials also are optimistic about Trinity's prospects.

"The dramatically improved appearance, combined with a highly visible and easily accessible location, plus the amenities of downtown Lowell, should make this a very attractive office property," Assistant City Manager Adam Baacke said.

The on-spec rehab should also help Trinity meet the timelines of businesses looking to relocate, Baacke added.

Several interests looking for commercial space in the 5,000- to 20,000- square-foot range in Lowell in recent years required occupancy within three to six months of their decision to relocate.

Neither the Freudenberg building nor the 43,000 square feet of commercial space Winn Development is developing at the Boott Mills could meet their deadlines. Some decided to move elsewhere in Lowell or to other communities.

"Both are likely to be in a good position to meet these timelines starting this spring or summer," Baacke said.

Follow Lyle Moran on Twitter @lylemoran.

Larry Sparrow, senior construction-project manager for Trinity Financial, talks about the renovation in process at the Freudenberg Nonwovens building on Canal Street in Lowell. The rehab is being done on-spec, with no tenants lined up. SUN/JULIA MALAKIE

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